https://www.fdic.gov/system/files/2024-09/qbp.pdf
Finra, a Wall Street regulator is understating Margin Debt by more than $4 TRILLION dollars, by not counting gigantic Meme Banks who make Margin Loans to Hedge Funds
Most market watchers rely on the monthly margin debt figures published by Wall Street’s self-regulator, FINRA, as the reliable gauge in determining how much of securities trading on Wall Street is being done with borrowed money, known as margin debt.
According to the FINRA data, as of March 31, 2024, margin debt stood at $784.136 billion.
Unfortunately, FINRA only has access to margin debt data filed by the brokerage firms it regulates (also known as brokers and dealers). Thanks to the repeal of the Glass-Steagall Act in 1999, which allowed federally-insured banks to be gobbled up by the trading casinos on Wall Street, the vast bulk of margin debt is now being loaned out not by brokerage firms but by giant banks where the U.S. taxpayer will be on the hook for a bailout if they go belly up from bad gambles – as occurred in the crash of 2008.
The U.S. Treasury’s Office of Financial Research (OFR) has posted a stunning graph showing that as of March 31, 2024, Global Systemically Important Banks in the U.S. (G-SIBs) had loaned out $2.348 trillion to hedge funds. Foreign Global Systemically Important Banks had loaned out another $1.628 trillion to hedge funds; and “Other Lenders” had loaned out an additional $566 billion to hedge funds. That brought the total of margin loans to just hedge funds on March 31, 2024 to a total of $4.542 trillion. (Put your cursor on the graph lines here or see the graph at the top of this page.)
OFR defines “Other Lenders” as “regulated banks that are not G-SIBs and nonbank lenders.”